Ireland faces EU pressure over low tax
Ireland faces a threat to its tax revenues from the European Union and the United States as international concerns grow about the attractiveness of Ireland's low-tax regime for companies. The European Commission has published proposals for the harmonisation of the European corporation tax base, effectively standardising the way tax is calculated across Europe, which Ireland's EU Commissioner Charlie McCreevy has described as tax harmonisation “by the back door'‘. Now pressure is also growing on the US government following news stories which have shown that US companies such as Microsoft and Google are avoiding hundreds of millions of dollars in US taxes by paying the lower rates of corporate tax in Ireland. Last week, the New York Times published an editorial calling for these tax loopholes to be closed, describing Ireland as “a tax haven'‘. This follows revelations in The Wall Street Journal that Microsoft had avoided paying more than half a billion dollars in US taxes by putting a small Dublin subsidiary in charge of billions of dollars in intellectual property assets. But the subsidiary had to pay tax in Ireland - and the Irish exchequer benefited by more than $300 million, according to Microsoft's accounts. US corporate tax rates are almost three times greater than the Irish rate of 12.5 per cent. It is likely that many more American companies are availing of the low Irish rates to pay tax in the Republic. Tech companies such as Dell and Intel and pharmaceutical giants such as Pfizer all have major operations in Ireland serving worldwide markets. Their contributions to the Irish exchequer are likely to run into the billions, swelling the government's coffers but causing resentment in the United States. Meanwhile, the European pressure on Ireland's low tax environment is likely to increase in the future. Although the commission's plans to harmonise the tax base are being vociferously opposed by McCreevy, the tax commissioner Laszlo Kovacs has indicated his intention to press on with the plans. Kovacs has identified harmonisation of the tax base as one of his two main priorities. The commission's tax directorate has also said it intends “to continue the fight against harmful tax competition'‘. McCreevy recently spoke glowingly about the benefits of tax competition. Last modified November 21, 2005 |